Abstract

In response to climate change and fear from irreversible environmental degradation, development of new agricultural industries in northern Australia is seen as a way to manage climate and environmental risks. This paper evaluates environmental and climate risks strategies employed by rice industry in Australia. In particular, the paper explores on-going structural adjustments in rice farming system and regional relocations options by considering the net effects of shifting agricultural production from southern rice areas to sugar dominated areas in northern Queensland, Australia, using dynamic regional Computable General Equilibrium (CGE) model. We find stronger evidence of structural adjustments in rice farming system to manage climate and environmental risks. Rice farmers are risk-averse and comparatively diversified, suggesting they will be relatively able to change the production systems to improve environmental outcomes. However, water with additional pressures to adopt less intensive and larger-scale farming, will reduce the net number of farm businesses, which may impact regional rice production. Regional relocation scenarios, under two time periods, 2030 and 2070, demonstrate that in all cases there is a net reduction in real economic output and real income, although a rice-sugarcane rotation in the northern Queensland partly offsets some of the negative impact. Nevertheless, this all presumes that the environmental consequences of such an expansion were not too severe. There would be no point in buying back ‘environmental’ water in the south, only to incur additional environmental costs in the north. We conclude that there is unlikely to be a rapid and spontaneous increase in rice production in the north, because of a lack of infrastructure, wariness in relation to the agronomic issues and the opportunity cost of turning away from sugar production. However, strong government support would be crucial to implement such relocation to achieve desirable social, economic and environmental outcomes.